The most essential ingredient in wealth creation is knowledge (and knowledge is a gift of God). Knowledge leads to surprises which we call innovation because innovations are unmanageable and unpredictable (more about that later). Innovations by their very nature can’t be managed or planned and innovations create wealth which positively affects culture.
More freedom leads to more knowledge which leads to more innovation which leads to a more powerful economy. Conversely, less freedom leads to less knowledge which leads to less innovation which leads to less economic growth. This raises the question as to why all governments do not embrace this self evident process. The reason (as alluded to earlier) is that innovation implies surprise and is and therefore more difficult for government to control. The operative word here is control. This lack of predictability and control make some people very uncomfortable. The desire to eliminate surprise and to control people is very much part of the warp and woof of communism and socialism.
In Europe with its failing welfare states we see this move to eliminate surprise and at the same time we see the increasing role of government with large bureaucracies and more regulatory law. So every new crisis, whether real or imagined brings more unnecessary laws and a corresponding lack of freedom. As one career politician said, “Never let a crisis go to waste”.
Most of these regulation like Dodd-Frank and Sarbanes-Oxley debilitate freedom and slow the expansion of knowledge. These Acts divert the small business owner’s energy away from innovation and consume their time and energy with compliance. These Acts also raise barriers of entry for new entrepreneurs. The entities who benefit from government regulations are the big corporations because they have the lobbyists, lawyers and accountants to address the problem of unnecessary government regulations.
The good news is that this move away from freedom can be and is being reversed. We saw this in Chile in the 1970s, in Eastern Europe after the fall of Communism, in New Zealand in the 1980s, in India and China in the 1990s, in Canada in the first decade of the 21st century, in Israel in the 1980s, and in America during the Reagan Administration (and now during the Trump Administration).
The future can change as fast as our minds can change, because the above is essentially an economy of the mind. We can be sure that when unnecessary government regulation and taxation diminishes knowledge and thus prosperity will follow.
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